Commerzbank: Gold Bull Run to Continue into 2021

Even if the vaccine proves effective and governments ease off the draconian policies they have implemented in response to the pandemic, governments and central banks will have to continue stimulus programs and loose monetary policies. That’s good for gold. Commerzbank sees things the same way, projecting gold’s bull run will continue through 2021 with the yellow metal rising to $2,300 by Q4. «Commerzbank analysts agree that the extraordinary monetary policy isn’t going to end any time soon.

Either governments, central banks, or both, will continue to pump liquidity into the financial system. If the necessary fiscal stimulus measures are not adopted in time due to resistance in the legislative process, pressure on central banks to step into the breach with further easing measures would increase». With QE and stimulus continuing, Commerzbank expects gold to push above August’s all-time highs in the coming year. Gold has struggled over the last several months despite significant dollar weakness.

Vaccine progress has sparked risk-on sentiment leading some to declare the gold bull run over. But even considering the drop from August’s record over $2,000 an ounce, gold has had a strong year. At $1,850 an ounce, gold is up 21% on the year and about 23% from the March lows. Looking further ahead, Commerzbank sees the gold bull run continuing into 2022.

Even if, as we expect, the corona pandemic can be brought largely under control in the second half of 2021 through sufficient immunization of the population, the enormously increased public debt levels caused by the corona policy and the inflated balance sheets of central banks will remain in place for a long time to come. «As the economy improves, gold jewelry demand should begin to pick up, particularly in China and India, boosting overall demand for the yellow metal. Commerzbank also expects central bank gold buying to continue into 2021. The arguments in favor of gold have not changed for the central banks at all.

The price development of gold in this challenging year has also shown that gold offers great advantages as an integral part of foreign exchange reserves».

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Source: SchiffGold